Who Is: Carl Icahn

Photo credit: Insider Monkey.

Photo Credit: Insider Monkey.

Corporate raider, activist shareholder, general thorn in the side of management…

Call him what you will, Carl Icahn has accumulated a net wealth estimated at $9 billion.

Icahn has gathered a keen following of both supporters and detractors over the years.

His United Shareholders of America campaign, promoted through his website The Icahn Report, aims to improve corporate governance by changing the laws to make CEOs and boards more accountable.

Born in New York in 1936, Icahn was the first student from his high school to be accepted to an Ivy League university, graduating with a degree in philosophy from Princeton. His studies were funded, in part, from his success at the poker table.

Pursuing his mother’s dream that he should become a doctor, he then enrolled in medical school, but dropped out after a couple of years, deciding it was not for him. After a brief stint in the army, he commenced a career on Wall Street in 1961.

Early career
Starting in convertible bonds, a bull market and lots of leverage allowed him to make more in a week than his father made in a year, but this success was short-lived: In 1962 he lost everything, and went back to the drawing board.

Returning to the market again, he decided to focus on options and arbitrage opportunities, and bought a seat on the stock exchange with the help of an uncle.

Eventually his focus shifted more towards identifying companies that were undervalued because of poor management, building up positions in those companies, and agitating for change.

Investing style
Icahn is convinced that the majority of American companies are examples of what he calls an anti-Darwinian “survival of the unfittest.” CEOs get to the top by being likable, politically astute, and not rocking the boat. “The best and the brightest,” he said, “don’t get to be at the top of the corporate ladder.” Compounding the problem, CEOs tend to employ people who won’t be a threat to their position.

This results in companies that underperform. Icahn asserted: “You look for the reason that they’re cheap, and the major reason is often and usually very poor management.”

His solution to that problem is to buy into these businesses, campaign to overthrow the CEO or the board — what is known in the United States as a proxy battle — and make the company a more desirable target for other companies to take over.

Some observers have referred to the “Icahn Lift” — the boost in share price that comes as soon as he is known to be interested in a company.

Often described as intimidating and tenacious, Icahn enjoys a fight, and in common with many of the great investors he sees himself as a contrarian. “The more people that think you’re wrong, the better you’re going to do in the long run.”

How does he identify the companies to attack? Having spent his life doing it, he says it’s now often more instinctual, but he still has an army of lawyers poring over covenants and bylaws to see where companies are vulnerable.